Section 121 of the Taxes Consolidation Act (TCA) 1997 provides that where a car is made available for the private use of an employee then the employee is chargeable to benefit-in-kind tax (BIK). Where such a benefit is provided for an employee by his or her employer, the employer is required to include that notional payment as part of the employee’s emoluments and to deduct tax via the PAYE system accordingly.
It is assumed that the Deputy is referring to the Finance Act 2019 changes to BIK, which introduced a CO2-based BIK regime for employer provided vehicles with effect from 1 January 2023. From that date the amount taxable as BIK is determined by the car’s original market value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands determines whether a standard, discounted, or surcharged rate is taxable. The number of mileage bands has reduced from five to four.
In certain instances, this new regime provides for higher BIK rates, for example in relation to above average emissions and high mileage cars. It should be noted, however, that the rates remained largely the same in the lower to mid mileage ranges for the average lower emission car. Additionally, EVs benefit from a preferential rate of BIK, ranging from 9 - 22.5% depending on mileage. Fossil-fuel vehicles are subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.
It was determined that reforming the BIK system to include emissions bands provided for a more sustainable environmental rationale than the continuation of the previous system. This brought the taxation system around employer provided cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other EU Member States. Finance Act (No 2) 2023 extended the preferential BIK treatment for EVs to end 2027 with a tapering mechanism on the vehicle value threshold.
An employee who uses an employer provided car mainly for carrying out business journeys (for example, a sales representative) will have generally greater business mileage. Mileage bands ensure that cars that are more integral to the conduct of the business benefit from lower rates of BIK.
The Deputy should note that as a cost of living measure, I provided in 2023 for a temporary universal relief of €10,000, which applied to the Original Market Value (OMV) of vehicles in Category A-D in order to reduce the amount of BIK payable. This measure included cars and vans and meant that, for the purposes of calculating BIK liability, employers could reduce the OMV by €10,000. The lower limit in the highest mileage band was also amended by way of a 4,000km reduction, so that the highest mileage band was entered into at 48,001km. I extended these measures to 31 December 2024 in Budget 2024.
It is not possible from the data submitted to Revenue in respect of benefit-in-kind to identify specific statistics solely in relation to BIK on employer-provided vehicles, as the information submitted is not itemised based on the type of benefit granted.
With regard to tax receipts relating to fuels for 2023, the table below details receipts for Mineral Oil Tax (MOT), Natural Gas Carbon Tax (NGCT), Solid Fuel Carbon Tax (SFCT), and VAT. In relation to VAT, I am advised by Revenue that traders are not required to identify the VAT yield generated from the supply of specific goods and services on their VAT returns. Therefore, it is not possible to provide the VAT yield on all fuel and energy related products and services using taxpayer information alone. However, using Revenue and third-party data sources, a tentative estimate of the VAT generated on fuel and energy products has be provided. The table below outlines the relevant amounts for 2023.
|
Description
|
€m
|
|
MOT Receipts
|
2,375.2
|
|
SFCT Receipts
|
19.2
|
|
NGCT Receipts
|
107.2
|
|
Estimated VAT Receipts
|
900.4
|
|
Total Receipts
|
3,402
|
There were no unbudgeted increases in fuel excise in 2023. MOT rates on petrol, auto- diesel and MGO increased on 1 June and 1 September 2023 as part of a planned reversal of MOT cuts that were introduced in March 2022 in response to the global energy crisis. Inclusive of VAT these cuts amounted to 21 cents, 16 cents and 5.4 cents per litre on petrol, auto-diesel and marked gas oil respectively. The Deputy will be aware that the reversal of these cuts was legislated to come into effect in October 2022, but were delayed until 1 March 2023, while the impacts of the global energy crisis continued. Finance Act 2023 postponed the reversal further and introduced provisions for MOT rate increases on three dates: 1 June, 1 September, and 31 October 2023. The rate increases that were to come into effect on 31 October 2023 were postponed further and Finance (No. 2) Act 2023 provided for the increases to apply in equal amounts on 1 April and 1 August 2024.
I am advised by Revenue that the estimated receipts arising from the restoration of MOT rates, and the associated VAT, on 1 June and 1 September 2023 are shown in the following table.
|
Tax Head
|
€m
|
|
MOT
|
187.5
|
|
VAT
|
11.4
|
It should be noted that rather than an increase in excise, the rate changes which occurred in June and September 2023 were partial restorations of rates which were in place prior to the temporary reductions in excise introduced in March 2022 as a part of the overall package of Government measures to provide financial support from energy price inflation. The cost of the temporary reductions in excise rates from their implementation in March 2022 to date is estimated at over €1.2 billion and remains an ongoing cost in terms of revenue foregone whilst they are maintained at reduced levels.
Further information on the taxation of employer-provided vehicles is included in Tax and Duty Manual Part 05- 01-01b, which is available at the following links:
• www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf
• www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/index.aspx
Rates for MOT, NGCT, and SFCT are available at the following link:
• www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf
